Accurate
Accessible
Affordable
Tax Update
2023 Year End Newsletter
Time to Get Organized!
With the 2023 tax filing season right around the corner, here are some ideas to help make processing this year's tax return as easy as ever.
What's New in 2023
Here are some key changes to the tax code for 2023.
Tax brackets and rates
The income brackets subject to tax are increasing by approximately 7 percent due to inflation. See 2023 brackets below.
Key tax code changes
-
Increased age for required distribution. If you turn 72 in 2023 or later, you can keep money in a tax-deferred IRA or 401(k) for another 12 months to help the account continue growing before starting to withdraw funds. This retirement benefit is now available thanks to the required minimum distribution age being raised from age 72 to age 73.
​
-
Decreased penalty if required distributions aren't taken. The penalty for failing to take a required minimum distribution is reduced from 50% to 25%. If the correction is generally made within two years, the penalty is further reduced to 10%.
​
New Tax Credits
-
Tax Credit for New Clean Vehicles. A credit up to $7,500 is available if you (or your business) buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle. Your modified adjusted gross income must not exceed:
-
$300,000 for married couples filing jointly​
-
$225,000 for heads of households
-
$150,000 for all other filers
-
​
-
Tax Credit for Used Clean Vehicles.
-
A credit up to $4,000 is available if you buy a previously owned, qualified plug-in electric vehicle or fuel cell electric vehicle, including cars and light trucks. Your modified adjusted gross income must not exceed:
-
​$150,000 for married couples filing jointly​
-
​$112,500 for heads of households
-
$75,000 for all other filers
-
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less.
​
-
Tax Credit for Energy Efficient Home Improvements. An annual tax credit up to $1,200 is available if you make qualified energy improvements to your home (biomass stoves and boilers have a separate annual credit limit of $2,000).
Income Brackets for 2022 Tax Rates
Great Tax Reduction Ideas
With the much higher standard deduction amounts, those who do not itemize think there are no longer ways to reduce your taxes.
Here are some ideas to consider:
-
Maximizing HSA contributions. If you have qualified high deductible health insurance, contribute as much as possible to a Health Savings Account (HSA). That way you not only reduce your taxable income, but you pay out-of-pocket qualified medical, dental and vision care with pre-tax dollars!
​
-
Leveraging retirement accounts to their fullest. There are numerous retirement tax plans, including 401(k), 403(b), and IRAs. The key is each has an annual contribution limit, and if you don't use that limit for the year, it is gone. So try to take full advantage of the tax benefits within each plan.
​
-
Donating appreciated assets. If you itemize deductions, instead of donating cash, consider donating appreciated assets you have owned for more than one year. Your charity gets the same financial value, but you not only get a great charitable donation, you also avoid paying capital gains tax on the investment.
-
Student loan interest. You can deduct up to $2,500 of student loan interest on your tax return. This includes parents co-signing the loan.
​
-
Bundling your itemized deductions. While many taxpayers do not have enough deductions to itemize, if you can bundle two or three years of deductions into one tax year you can maximize your deductions in that particular year.
​
Remember, the end of the tax year and the beginning of the new one are great times to think about these tax savings ideas.
ALERT: Form 1099-K Reporting Change
Because of a late breaking change in November 2023, you could still receive Form 1099-Ks that may need to be reported on your tax return.
​
This last-minute change (literally 45 days days before vendors need to start sending out 1099-Ks) moves the $600 threshold for receiving a Form 1009-K back to $20,000 for 2023.
What You Should Do:
-
Save the Form. If you receive a 1099-K, save the form! You will need to account for this information on your tax return or face the possibility of the activity triggering a correspondence audit from the IRS that may lead to a bigger tax bill.
​
-
It's a Business Transaction. If you have activity on sites like Amazon, Etsy, or you are reselling tickets or taking payments, you are in a business. In the eyes of the IRS, this is true even if you lost money on the transactions. This revenue needs to be reported even if you don't receive a 1099-K. But you can also include any related business expenses to reduce reportable income.
​
-
Stay organized. If you receive any Form 1099-Ks, your tax return will now be a bit more complex. But you can help by staying organized and well documented to explain exactly how you used the third party payment platform that sent you the form.
​
1099-K Basics
Here are the basics about Form 1099-K in the event you do not receive one:
​
-
It shows gross payment amounts. A Form 1099-K reports the gross amount of payments received by you from payment transactions such as credit cars; digital payment services like PayPal, Venmo, and Apple Pay; and online marketplaces like Amazon and Etsy.
-
Peronal Payments may be included on a 1090-K. It's possible that a personal payment you received, for example from a friend sending you their share of a resaurant bil, ends up being included on a 1099-K. You will need to account for this.
Remember, though, that whether or not you receive a Form 1099-K, the IRS expects you to report all your taxable income.
Key Retirement Plan Limits
Standard Deductions
Mileage Rates for 2023
Maximum Earned Income
Tax Credit for 2022
Section 179 Maximums
Reasons to File Early
Here are several reasons you may want to file your tax return as soon as the IRS begins accepting returns in January:
​
-
To Get Your Refund! There's no reason to let the government hold onto your funds interest-free, so file early and get your refund as soon as possible. While legislation delays receiving refunds for tax returns claiming the Earned Income Credit and the Additional Child Tax Credit until after February 15th, the sooner your tax return is in the queue, the sooner you will receive your refund.
​
-
To Minimize Your Tax Identity Fraud Risk. Once you file your tax return, the window of opportunity for tax identity thieves closes. Tax identity thieves work early during the tax filing season because your paycheck's tax withholdings are still in the hands of the IRS. If they can file a tax return before you do, they may be able to steal these withholdings via a refund that should have gone to you!
​
-
To Avoid a Dependent Dispute. One of the most common reasons an e-filed return is rejected is when you submit a dependent's Social Security number that has already been used by someone else. If you think there is a chance an ex-spouse may do this, you should file as early as possible.
​
-
To deliver your return to someone who needs it. If you are planning to buy a house or anticipate any other transaction that will require proof of income you may wish to file early. This is especially important if you are self-employed. You can then make your filed tax return available to your bank or other
Have Questions?
We're Here to Help!
Feel free to contact us if you have any questions. We are here to help make your life easier!
​
​
​
​
​
​
​
​
​
​
This publication provides summary information regarding the subject matter at time of printing.
Please call with any questions on how this information may impact your situation.
03-050 © 2023